gao-15-87r, improper payments: inspector general reporting ... · 1. for fiscal year 2013, federal...

GAO-15-87R OIG Improper Payment Reporting

441 G St. N.W. Washington, DC 20548

December 9, 2014

Congressional Addressees

Improper Payments: Inspector General Reporting of Agency Compliance under the Improper Payments Elimination and Recovery Act

Improper payments—such as duplicate or erroneous payments, payments to ineligible recipients, or payments for ineligible services—have been a long-standing challenge of the federal government and have annually totaled billions of dollars.1 For fiscal year 2013, federal agencies reported an estimated $105.8 billion in improper payments, a decrease of $1.3 billion from the prior year revised estimate of $107.1 billion.2 Based on our review of Office of Management and Budget (OMB) data, the $105.8 billion estimate was attributable to 84 programs across 18 agencies (see enc. I).3

Fiscal year 2013 marked the 10th year of implementation of the Improper Payments Information Act of 2002 (IPIA),

Five programs accounted for approximately $82.9 billion, or 78 percent of the total improper payments estimate in fiscal year 2013 (see enc. II for a list of the five programs with the largest estimates for fiscal years 2011 through 2013).

4 as well as the 3rd year of implementation of the Improper Payments Elimination and Recovery Act of 2010 (IPERA).5

1An improper payment is defined as any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements. It includes any payment to an ineligible recipient, any payment for an ineligible good or service, any duplicate payment, any payment for a good or service not received (except for such payments where authorized by law), and any payment that does not account for credit for applicable discounts. Office of Management and Budget guidance also instructs agencies to report as improper payments any payments for which insufficient or no documentation was found. It is important to note that reported improper payment estimates may or may not represent a loss to the government.

IPIA requires executive branch agencies to annually identify programs and activities susceptible to significant improper payments, estimate the amount of improper payments, and report these estimates along with actions planned or taken to reduce them. IPERA expanded on IPIA and added new requirements toward ensuring

2In their fiscal year 2013 performance and accountability reports or agency financial reports, three federal agencies updated their fiscal year 2012 improper payment estimates to reflect changes since issuance of their fiscal year 2012 reports. These updates decreased the government-wide improper payment estimate for fiscal year 2012 from $107.7 billion to $107.1 billion.

3The18 agencies that reported improper payment estimates included 16 agencies covered by this review as well as the Federal Communications Commission and the Railroad Retirement Board. This $105.8 billion estimate does not include the Department of Defense’s Defense Finance and Accounting Service Commercial Pay program because of concerns regarding the reliability of its improper payment estimate. See GAO, DOD Financial Management: Significant Improvements Needed in Efforts to Address Improper Payment Requirements, GAO-13-227 (Washington, D.C.: May 13, 2013). The government-wide improper payment estimate for fiscal year 2013 including this program was $105.9 billion.

4Pub. L. No. 107-300 (Nov. 26, 2002).

5Pub. L. No. 111-204 (July 22, 2010).

http://www.gao.gov/products/GAO-13-227


that agencies perform risk assessments for all programs, publish corrective action plans to reduce improper payments, and meet planned improper payment reduction targets and error rates. Subsequent to IPERA, the Improper Payments Elimination and Recovery Improvement Act of 2012 (IPERIA) was enacted to further enhance improper payments requirements and give agencies additional tools to address improper payments.6

IPERA calls for executive agencies’ offices of inspector general (OIG) to annually determine whether their respective agencies are in compliance with six specific IPERA criteria. OMB, which is directed by statute to provide guidance to executive agencies on the estimation and reporting of improper payments, has also asked the OIGs to assess compliance with one additional criterion, which calls for agencies to report on their efforts to recapture improper payments.

7 In total, for fiscal years 2011 through 2013, the OIGs were required to annually assess and report on their respective agencies’ compliance with the following seven criteria:8

• publish an annual financial statement and accompanying materials in the form and content required by OMB—typically a performance and accountability report (PAR) or agency financial report (AFR)—for the most recent fiscal year and post that report on the agency website;

• conduct a risk assessment for each specific program or activity that conforms with IPIA as amended;

• publish estimates of improper payments for all programs and activities identified as susceptible to significant improper payments under the agency’s risk assessment;9

• publish corrective action plans for programs and activities assessed to be at risk for significant improper payments;

• publish and meet annual reduction targets for all programs and activities assessed to be at risk for significant improper payments;

• report a gross improper payment rate of less than 10 percent for each program and activity for which an improper payment estimate was obtained and published; and

• report on efforts to recapture improper payments.

6Pub. L. No. 112-248 (Jan. 10, 2013). IPERIA amended IPIA by requiring OMB to annually identify a list of high-priority federal programs for greater oversight and review by agency OIGs. IPERIA also established the Do Not Pay Initiative. This initiative requires federal agencies to conduct procedures to determine program and award eligibility prior to the release of funds and includes a thorough review of available databases to assist in determining eligibility.

7Office of Management and Budget, Issuance of Revised Parts I and II to Appendix C of OMB Circular A-123, OMB Memorandum No. M-11-16 (Washington, D.C.: Apr. 14, 2011), was the OMB guidance in effect for fiscal year 2013. In October 2014, OMB issued new guidance for improper payments in Memorandum No. M-15-02, Appendix C to Circular No. A-123, Requirements for Effective Estimation and Remediation of Improper Payments. This new guidance, effective for fiscal year 2014 reporting, changes certain requirements, such as the reporting period for OIG IPERA reports, and also eliminated the need for OIGs to assess whether the agency has reported on efforts to recapture improper payments.

8For purposes of this report, we will refer to all seven criteria as IPERA criteria.

9Per OMB guidance, the annual estimate of improper payments reported in the PAR or AFR should coincide with the fiscal year being reported, to the extent possible. Agencies may utilize a different 12-month reporting period if it has been approved by OMB. For example, some agencies may have used fiscal year 2012 information in their fiscal year 2013 agency PARs or AFRs.


Some of these criteria are not applicable to agencies that determine through risk assessments that none of their programs or activities are susceptible to significant improper payments.10 Per OMB guidance, effective for fiscal years 2011 through 2013, an OIG was required to issue a report on its assessment of compliance with these seven criteria, as applicable, within 120 days of the publication of the agency’s annual PAR or AFR.11

Objective, Scope, and Methodology

In light of congressional interest in agency efforts to estimate, reduce, and recover improper payments, we performed our work under the authority of the Comptroller General to assist Congress with its oversight responsibilities.12 The objective of this review is to provide information on compliance with the seven IPERA criteria discussed above for the 24 agencies that are subject to the Chief Financial Officers Act of 1990 (CFO Act),13

To address our objective, we reviewed the agencies' fiscal year 2013 OIG IPERA reports, which were the most current available at the time of our work, and summarized information related to their compliance with IPERA criteria and identified common findings and related causes for improper payments as reported by the OIGs. We also reviewed the agencies’ fiscal year 2012 and 2011 OIG IPERA reports and compared agencies’ compliance with each IPERA criterion over the first 3 years following the law’s enactment, as reported by the OIGs. Our work did not include validating or retesting the data or methodologies used by the OIGs in coming to their conclusions. We also obtained and summarized OMB and agencies’ data on improper payment estimates by agency program (see encs. I through III). We conducted our work from April 2014 to December 2014 in accordance with all sections of GAO’s Quality Assurance Framework that are relevant to our objectives. The framework requires that we plan and perform the engagement to obtain sufficient and appropriate evidence to meet our stated objectives and to discuss any limitations in our work. We believe that the information and data obtained, and the analysis conducted, provide a reasonable basis for any findings and conclusions in this product.

as reported in their OIGs’ IPERA reports. Although IPERA requirements apply to the head of each executive agency, we reviewed only those agencies designated as CFO Act agencies because these agencies represented over 99 percent of total government-wide improper payments reported in fiscal year 2013.

10Pursuant to an amendment made to IPIA by section 4 of IPERIA, for fiscal year 2013, a program is considered susceptible to significant improper payments if its risk assessment determines that the program’s improper payments may have exceeded (1) both 2.5 percent of program outlays and $10 million of all program activity during the fiscal year or (2) $100 million regardless of the percentage. For fiscal year 2014, the threshold is potential improper payments exceeding (1) both 1.5 percent of program outlays and $10 million or (2) $100 million regardless of the percentage.

11OMB Memorandum No. M-11-16.

12For Comptroller General’s authority, see 31 U.S.C. § 717(b)(1).

13The CFO Act, Pub. L. No. 101-576 (Nov. 15, 1990), established chief financial officers to oversee financial management activities at 23 major executive departments and agencies. The list now includes 24 entities, which are often referred to collectively as CFO Act agencies, and is codified, as amended, in section 901 of Title 31, United States Code.


CFO Act Agencies’ Reported Compliance with IPERA Criteria

OIG IPERA Reporting for Fiscal Year 2013

For fiscal year 2013, OIGs for 13 of the 24 CFO Act agencies reported that their agencies complied with all of the IPERA criteria that were applicable to their agencies. As shown in figure 1, the OIGs for 10 agencies reported that their agencies did not satisfy at least one of the specified criteria, and the OIG for the National Science Foundation (NSF) did not issue a report, stating that NSF was not required to report improper payment data in its fiscal year 2013 PAR.


Figure 1: Fiscal Year 2013 CFO Act Agencies’ Compliance under IPERA as Reported by Their OIGs

IPERA and OMB guidance do not require agencies’ OIGs to use a specific method or format for evaluating and reporting on compliance with IPERA criteria. The OIGs varied widely in the reporting formats and levels of detail used to document and report on agency compliance under


IPERA. The OIG IPERA reports we reviewed for fiscal year 2013 ranged from brief reports that indicated the agencies’ compliance under IPERA in one paragraph to extensive reports with information on how the OIGs evaluated improper payment methodologies, reliability issues, and other factors.

Common Areas of Noncompliance and Related Reported Causes

Fiscal year 2013 OIG IPERA reports showed that most CFO Act agencies reported on improper payments in their PARs or AFRs, conducted program risk assessments, and reported on actions to recover improper payments. However, the OIGs reported that many agencies did not meet planned reduction targets or achieve and report gross improper payment error rates below 10 percent.14

Figure 2 summarizes CFO Act agencies’ reported compliance by IPERA criterion for fiscal year 2013.

Figure 2: Fiscal Year 2013 CFO Act Agencies’ Overall Compliance by IPERA Criterion, as Reported by Their OIGs

The most common area where OIGs found agencies noncompliant with the IPERA criteria was in publishing and meeting annual improper payment reduction targets, which 10 CFO Act agencies did not meet. Although 9 of these agencies published improper payment reduction 14“Error rate” refers to a program’s estimated annual improper payments as a percentage of that program’s annual expenditures. To comply with IPERA criteria, agencies should report improper payment error rates below 10 percent.


targets, an additional agency that was required to publish its target did not, and none of these 10 succeeded in meeting their targets for fiscal year 2013. The OIGs reported that factors affecting compliance with this requirement included the programs’ structures and continued challenges with supporting documentation.15 For example, the Department of Health and Human Services (HHS)16 and the Department of Agriculture (USDA)17 OIGs reported that administrative and documentation errors prevented these agencies from meeting their reduction targets; the Department of Housing and Urban Development (HUD) OIG reported errors and system limitations, among others, as impediments to HUD achieving its reduction targets;18 and the Department of Transportation (DOT) OIG reported payments for ineligible goods and services, incorrect payment calculations, and payments made with insufficient supporting documentation as challenges that prevented the agency from meeting its annual reduction target.19

The second most common noncompliance finding reported by the OIGs was the agencies’ inability to achieve and report improper payment error rates below 10 percent. According to the OIGs’ IPERA reports, 5 CFO Act agencies reported an improper payment error rate of 10 percent or higher for at least one of their programs or activities. The OIGs cited various reasons their agencies provided for not being able to comply with this criterion. Some reported as causes the complexities in the structure of the programs and the lack of documentation, which prevented accurate authentication and verification of eligible recipients. For example, the USDA OIG reported that USDA’s School Breakfast and National School Lunch programs’ high error rates of about 25 and 16 percent, respectively, were caused in part by authentication and verification errors.

Other reported reasons agencies did not meet reduction targets were inadequacies with, and changes in, sampling and estimating methodologies.

20

15Beginning in fiscal year 2011, according to OMB’s guidance—OMB Circular No. A-136, Financial Reporting Requirements, revised October 21, 2013, and OMB Memorandum No. M-11-16—agencies were required to classify the root causes of estimated improper payments into three general categories for reporting purposes: (1) documentation and administrative errors, (2) authentication and medical necessity errors, and (3) verification errors. While some agencies generally reported some description of the causes of improper payments for their respective programs in their fiscal year 2013 AFRs, many agencies did not use the three categories to classify the types of errors.

The Small Business Administration’s (SBA) OIG reported that the main impediment to reducing SBA’s improper payment error rate was incomplete documentation,

16Department of Health and Human Services, Office of Inspector General, U.S. Department of Health and Human Services Met Many Requirements of the Improper Payments Information Act of 2002 But Did Not Fully Comply for Fiscal Year 2013, A-17-14-52000 (Washington, D.C.: April 2014).

17Department of Agriculture, Office of Inspector General, Improper Payments Elimination and Recovery Act of 2010 Compliance Review for Fiscal Year 2013, Audit No. 50024-0005-11 ( Washington, D.C.: Apr. 15, 2014).

18Department of Housing and Urban Development, Office of Inspector General, U.S. Department of Housing and Urban Development Compliance with the Improper Payments Elimination and Recovery Act of 2010, 2014-FO-0004 (Washington, D.C.: Apr. 15, 2014).

19Department of Transportation, Office of Inspector General, Accuracy and Reliability of DOT’s Improper Payment Reporting Can Be Improved, FI-2014-037 (Washington, D.C.: Apr. 15, 2014).

20Department of Agriculture, Office of Inspector General, Improper Payments Elimination and Recovery Act of 2010 Compliance Review for Fiscal Year 2013. USDA’s OIG reported that USDA used results from a school year 2005 study to develop its current formulas to estimate improper payment rates for its School Breakfast and National School Lunch programs and that this affected the reliability of the estimates.


such as loan applications, especially in times of major disasters, such as Hurricane Sandy.21 Finally, the Department of the Treasury (Treasury) OIG reported that the complexity of the tax law was a barrier to reducing the improper payment error rate for the Internal Revenue Service’s Earned Income Tax Credit program.22

Other areas where agencies did not all comply with IPERA criteria according to the OIG IPERA reports included publishing improper payment estimates for risk-susceptible programs and publishing corrective action plans. OIG reports indicated that 2 agencies’ remediation plans were incomplete and ineffective and did not properly target the root causes for improper payments. Two OIGs also reported that their agencies used incorrect sampling methodologies to calculate the improper payment estimates or did not publish improper payment estimates for their programs. For example, the USDA OIG reported that USDA’s Federal Crop Insurance Corporation did not have an adequate sampling methodology to estimate its improper payments because it excluded significant payments, such as premium subsidies and indemnities below certain thresholds. Further, according to the HHS OIG, HHS did not publish estimates for its Temporary Assistance for Needy Families (TANF) program because it is a state-administered program and HHS asserts that statutory limitations prohibit it from requiring states to collect the information needed to perform an improper payment measurement.

23

Reported Changes in Compliance since IPERA Enactment

According to OIG IPERA reports, agencies have shown overall improvement in reporting and addressing improper payments in the 3 years since IPERA was enacted in 2010. For example, in fiscal year 2011, the OIGs reported that 18 of the 24 CFO Act agencies had conducted risk assessments for all risk-susceptible programs; in fiscal year 2013, the OIGs reported that 22 agencies conducted the required assessments. Another area of improvement was agencies’ reporting of their efforts to recover overpayments; in fiscal year 2013, the OIGs reported that 22 agencies reported on their efforts to recover improper payments, as compared to 15 agencies in fiscal year 2011.

Although the OIGs have reported improvements by some agencies in certain areas over the 3-year period, the OIGs for several agencies have not reported agency improvements in meeting planned reduction targets or lowering improper payment error rates to less than 10 percent.24

21Small Business Administration, Office of Inspector General, SBA’s Progress in Complying with the Improper Payments Elimination and Recovery Act, 14-11 (Washington, D.C.: Apr. 10, 2014).

For example, according to the OIG reports, USDA’s School Breakfast and Lunch programs, Treasury’s Earned Income Tax Credit program, and SBA’s Disaster Assistance Loans program

22Department of the Treasury, Office of Inspector General, The Department of the Treasury Was Not in Compliance With the Improper Payments Elimination and Recovery Act for Fiscal Year 2013, OIG-14-032 (Washington, D.C.: Apr. 15, 2014).

23HHS points to section 417 of the Social Security Act of 1935, as amended, which provides that no federal employee or officer may regulate the conduct of states under the part of the act containing the TANF laws except to the extent expressly provided in that part. See 42 U.S.C. § 617. In its March 2012 report on the Department's compliance with improper payment reporting, the HHS OIG recommended that the Department develop an improper payment estimate for the TANF program and, if necessary, seek statutory authority to require state participation in such a measurement. The HHS OIG stated that in subsequent reports, the OIG has continued to emphasize this recommendation but the recommendation remains unimplemented.

24See enc. III for a complete list of all programs that exceeded a 10 percent error rate from fiscal year 2011 through 2013.


have not met planned reduction targets for the past 3 fiscal years, and their reported error rates have been among the highest reported error rates in the government, ranging from 16 to 28 percent for the past 3 fiscal years. Figure 3 shows the prevalence of reported compliance by criterion from fiscal year 2011 through fiscal year 2013.

Figure 3: CFO Act Agency Compliance under IPERA, as Reported by Their OIGs (Fiscal Years 2011-2013)

IPERA includes consequences for agencies whose OIGs find noncompliance with any of the six statutory criteria.25

25The seventh criterion added by OMB—reporting on recovery auditing activities—does not trigger the statutory consequences for noncompliance.

If a program is found to be noncompliant in a fiscal year, the agency must submit a plan to Congress describing the actions that the agency will take to bring the program into compliance. If a program is found to be noncompliant for 2 consecutive fiscal years, and if OMB determines that additional funding would help the agency improve in this regard, steps may be taken to transfer or request that funding. Agencies for which OIGs have found programs to be noncompliant with IPERA for 3 consecutive years must submit to Congress a reauthorization proposal for each noncompliant program or activity or any proposed statutory changes they deem necessary to bring the program or activity into compliance. This is the third year of IPERA’s implementation, and certain programs have been found to be noncompliant all 3 years. Therefore, agencies will be required to develop reauthorization proposals or propose statutory changes necessary to bring these programs or activities into compliance.


Concluding Observations

According to OIG IPERA reports, agencies have made improvements in estimating and reporting improper payments since IPERA was enacted. However, many agencies are still reporting large improper payment estimates and error rates.

As we have previously reported, many agencies are in the process of assessing program designs and implementing or refining preventive controls, such as validation of eligibility, predictive analytic tests, and training programs, to help decrease improper payments.26

Agency Comments

Although strong preventive controls remain the frontline defense against improper payments, agencies also need effective detection techniques to quickly identify and recover those overpayments that do occur. The fiscal year 2013 OIG reports included numerous recommendations aimed at providing agencies with the tools necessary to address the causes for their improper payments and IPERA noncompliance issues.

We provided a draft of this report to the Director of OMB and the Inspectors General of all 24 CFO Act agencies. OMB provided written comments, reproduced in enclosure IV, that highlighted initiatives to reduce improper payments, which it considers a key priority. The Offices of Inspector General for 22 of the CFO Act agencies provided comments via email. In addition, the Offices of Inspector General for the Social Security Administration and the General Services Administration provided written comments, which are reproduced in enclosures V and VI, respectively. All of the Inspectors General generally agreed with the information presented in this report. The Offices of Inspector General for the Departments of Education, Health and Human Services, Labor, and Veterans Affairs; the National Science Foundation; the Small Business Administration, and the Social Security Administration also provided technical comments that were incorporated, as appropriate.

-----

We are sending copies of this report to the appropriate congressional committees. We will also send copies to the Director, Office of Management and Budget, and all CFO Act agencies’ offices of inspector general. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.

26See GAO, Improper Payments: Government-Wide Estimates and Reduction Strategies, GAO-14-737T (Washington, D.C.: July 9, 2014).

http://www.gao.gov/�

http://www.gao.gov/products/GAO-14-737T


If you or your staff have any questions about this report, please contact me at (202) 512-2623 or [email protected]. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff members who made major contributions to this report include Elizabeth Martinez (Assistant Director) and Bruce David.

Beryl H. Davis Director Financial Management and Assurance

mailto:[email protected]�


List of Addressees The Honorable Thomas R. Carper Chairman Committee on Homeland Security and Governmental Affairs United States Senate The Honorable Darrell Issa Chairman Committee on Oversight and Government Reform House of Representatives The Honorable John L. Mica Chairman The Honorable Gerald E. Connolly Ranking Member Subcommittee on Government Operations Committee on Oversight and Government Reform House of Representatives


Enclosure I: Reported Improper Payment Estimates by Agency and Program/Activity for Fiscal Year 2013

Agency/reporting program

Reported by agencies in PARs/AFRs for FY 2013

Improper payment estimate

Error rate Outlays

CFO Act agencies

Department of Health and Human Services $65,289,000,000 $800,659,000,000

1 Medicare Fee-for-Service (Parts A and B) $36,033,000,000 10.10% $357,397,000,000 2 Medicare Advantage (Part C) $11,767,000,000 9.50% $123,696,000,000 3 Medicare Prescription Drug Benefit (Part D) $2,091,000,000 3.70% $57,056,000,000 4 Medicaid $14,376,000,000 5.80% $246,931,000,000 5 Children's Health Insurance Program $646,000,000 7.10% $9,065,000,000 6 Foster Care $70,000,000 5.30% $1,326,000,000 7 Child Care Development Fund $306,000,000 5.90% $5,188,000,000 Department of the Treasury $14,450,000,000 $60,300,000,000

8 Earned Income Tax Credit $14,450,000,000 24.00% $60,300,000,000 Social Security Administration $6,783,000,000 $823,711,000,000 9 Old Age, Survivors & Disability Insurance $2,448,000,000 0.32% $770,300,000,000 10 Supplemental Security Income $4,335,000,000 8.12% $53,411,000,000 Department of Labor $6,230,810,000 $69,783,000,000

11 Unemployment Insurance $6,225,000,000 9.32% $66,788,000,000 12 Workforce Investment Act $5,810,000 0.19% $2,995,000,000 Department of Agriculture $6,162,000,000 $115,025,000,000

13 Supplemental Nutrition Assistance Program $2,553,000,000 3.42% $74,639,000,000 14 Federal Crop Insurance Corporation Program

Fund $566,000,000 5.23% $10,828,000,000

15 Marketing Assistance Loan Program $8,000,000 0.34% $2,344,000,000 16 Wildland Fire Suppression Management $0 0.00% $835,000,000 17 Rental Assistance Program $20,000,000 1.79% $1,108,000,000 18 Farm Security & Rural Investment Act Programs $158,000,000 6.93% $2,277,000,000 19 Child and Adult Care Food Program, Family Day

Care Homes — Tiering Decisions $10,000,000 1.09% $917,000,000

20 Conservation Reserve Program $6,000,000 0.38% $1,651,000,000 21 Miscellaneous Disaster Programs $24,000,000 3.78% $655,000,000 22 Noninsured Assistance Program $13,000,000 5.23% $256,000,000 23 Special Supplemental Nutrition Program for

Women, Infants, and Children $198,000,000 4.38% $4,520,000,000

24 National School Lunch Program $1,774,000,000 15.69% $11,304,000,000 25 School Breakfast Program $831,000,000 25.26% $3,290,000,000 26 Milk Income Loss Contract Program $1,000,000 0.17% $401,000,000

Department of Education $1,843,700,000 $160,376,000,000 27 Pell Grants $731,000,000 2.26% $32,338,000,000 28 Direct Loan $1,056,000,000 1.03% $102,497,000,000





Error rate Outlays

29 Family Federal Education Loan Program $0 0.00% $10,817,000,000 30 Title I - Grants to States $56,700,000 a 0.39% $14,724,000,000

Department of Housing and Urban Development $1,324,000,000 $30,949,038,000 31 Public Housing/Rental Assistance $1,324,000,000 4.30% $30,949,038,000 Department of Veterans Affairs $1,074,040,000 $72,436,000,000 32 Compensation $321,100,000 0.67% $48,181,000,000 33 Pension $92,430,000 1.75% $5,268,000,000 34 Education-Chapter 33 $0 0.00% $8,769,000,000 35 Education-Chapter 1606 $480,000 0.33% $146,000,000 36 Education-Chapter 1607 $390,000 0.44% $88,000,000 37 Vocation Rehabilitation and Employment $2,150,000 0.27% $786,000,000 38 Non-VA Care Fee $429,070,000 9.64% $4,447,000,000 39 State Home Per Diem Grants $135,230,000 15.94% $848,000,000 40 Supplies and Materials $2,530,000 0.11% $2,230,000,000 41 Civilian Health and Medical Program of the

Department of Veterans Affairs $20,920,000 2.26% $924,000,000

42 Beneficiary Travel $69,740,000 9.32% $749,000,000 Department of Defense $1,064,880,000 $615,760,000,000 43 Military Retirement Benefits $19,900,000 0.04% $56,600,000,000 44 Military Health Benefits $67,600,000 0.32% $20,500,000,000 45 Military Pay $286,600,000 0.29% $98,700,000,000 46 Civilian Pay $96,400,000 0.17% $57,000,000,000 47 Department of Defense Travel Pay $474,800,000 6.50% $7,300,000,000 48 Defense Finance and Accounting Service

Commercial Pay$117,300,000

b 0.03% $352,600,000,000

49 U.S. Army Corps of Engineers Travel Pay $2,280,000 1.43% $160,000,000 50 U.S. Army Corps of Engineers Commercial Pay $0 0.00% $21,700,000,000 51 Navy Enterprise Resource Planning Commercial

Pay $0 0.00% $1,200,000,000

Small Business Administration $694,400,000 $19,373,200,000 52 Disaster Loan Disbursements $121,100,000 18.40% $659,000,000 53 7(a) Guaranty Purchases $13,900,000 1.15% $1,211,400,000 54 7(a) Guaranty Approvals $510,900,000 4.60% $10,994,500,000 55 504 Certified Development Company Guaranty

Approvals $34,400,000 0.54% $6,386,900,000

56 Contract Disbursements $14,100,000 11.60% $121,400,000 Office of Personnel Management $352,490,000 $120,069,600,000 57 Federal Employee Retirement Programs $278,300,000 0.36% $76,485,900,000 58 Federal Employee Health Benefit Program $74,190,000 0.17% $43,583,700,000 Department of Homeland Security $178,000,000 $13,767,000,000 59 National Flood Insurance Program $0 0.02% $2,127,000,000





Error rate Outlays

60 Public Assistance Programs $41,000,000 1.11% $3,670,000,000 61 Homeland Security Grant Program $22,000,000 1.31% $1,699,000,000 62 Assistance to Firefighters Grants $5,000,000 1.07% $425,000,000 63 Detention/Enforcement and Removal Operations $73,000,000 4.33% $1,691,000,000 64 Disaster Relief Fund Vendor Payments $23,000,000 3.11% $750,000,000 65 Customs and Border Protection Custodial

Refund & Drawback $7,000,000 0.36% $1,937,000,000

66 Federal Protective Service $0 0.03% $878,000,000 67 Customs and Border Protection Border Security

Fencing $0 0.01% $173,000,000

68 Transit Security Grants Program $7,000,000 2.06% $328,000,000 69 Emergency Food and Shelter Program $0 0.34% $89,000,000 Department of Transportation $158,960,000 $57,685,000,000 70 Federal Highway Administration Highway

Planning/Construction $82,910,000 0.20% $41,455,000,000

71 Federal Transit Administration Formula Grants Program

$72,350,000 0.73% $9,911,000,000

72 Federal Transit Administration Capital Investment Grants Program

$950,000 0.04% $2,386,000,000

73 Federal Aviation Administration Airport Improvement Program

$2,750,000 0.07% $3,933,000,000

Environmental Protection Agency $70,800,000 $3,508,000,000 74 Clean Water State Revolving Fund $15,600,000 0.73% $2,150,000,000 75 Drinking Water State Revolving Fund $55,200,000 4.06% $1,358,000,000 General Services Administration $64,380,000 $6,781,600,000 76 Rental of Space $59,550,000 1.07% $5,556,000,000 77 Purchase Card $4,280,000 7.79% $54,900,000 78 Building Operations Utilities $250,000 0.06% $400,000,000 79 Integrated Technology Service-Wide Area

Network $0 0.00% $753,000,000

80 Other Sensitive Payments $300,000 1.67% $17,700,000 Agency for International Development $5,650,000 $9,423,000,000 81 USAID Twenty Seven Programs $5,650,000 0.06% $9,423,000,000 Department of Commerce N/R N/R Department of Energy N/R N/R Department of the Interior N/R N/R Department of Justice N/R N/R Department of State N/R N/R National Aeronautics and Space Administration N/R N/R National Science Foundation N/R N/R Nuclear Regulatory Commission N/R N/R


Non-CFO Act agencies

Railroad Retirement Board $61,800,000 $11,347,300,000 82 Retirement and Survivors Benefits $61,800,000 0.54% $11,347,300,000 Federal Communications Commission $59,917,000 $7,138,353,000 83 Universal Service Fund - High Cost $10,563,000 0.26% $4,119,737,000 84 Universal Service Fund - Schools and Libraries $49,354,000 2.21% $2,232,284,000 85 Telecommunications Relay Services Fund $0 0.00% $786,332,000

Total $105,867,827,000 $2,998,092,091,000

Legend: AFR = agency financial report; CFO Act = Chief Financial Officers Act of 1990; FY = fiscal year; NR = not reported; PAR = performance and accountability report. Source: GAO summary of Office of Management and Budget data and agencies’ data. | GAO-15-87R aThe Department of Education OIG stated that Education did not identify its Title I program as a program susceptible to significant improper payments in its risk assessment. However, the agency is required to include this program based on reporting requirements contained in OMB Circular A-136, Financial Reporting Requirements, revised October 21, 2013. Specifically, this requirement states that any programs that had been previously identified in the former Section 57 of OMB Circular No. A-11 shall continue to report improper payment estimates, unless OMB has granted relief from reporting requirements. b

This table includes the Department of Defense’s Defense Finance and Accounting Service (DFAS) Commercial Pay improper payment estimate of $117.3 million and corresponding outlays of $352.6 billion as reported by the Office of Management and Budget in fiscal year 2013. However, the reported government-wide estimate of $105.8 billion in improper payments attributable to 84 programs or activities excludes DFAS Commercial Pay because of concerns regarding the reliability of its estimate. The government-wide improper payment estimate for fiscal year 2013 including this program is $105.9 billion.


Enclosure II: Top Five Programs and Activities Reporting Largest Improper Payment Estimates for Fiscal Years 2011 through 2013

Dollars in millions

Agency Program name Improper payment

estimate Outlays

Improper payment

error rate FY 2013 HHS Medicare Fee-for-Service $36,033 $357,397 10.1% Treasury Earned Income Tax Credit $14,500 $60,300 24.0% HHS Medicaid $14,376 $246,931 5.8% HHS Medicare Advantage (Part C) $11,767 $123,696 9.5% DOL Unemployment Insurance $6,225 $66,788 9.3% Total $82,901 $855,112 Top five programs accounted for 78 percent of total estimated improper payments of $105.8 billion in programs producing estimates in FY 2013

FY 2012 HHS Medicare Fee-for-Service $29,571 $349,673 8.5% HHS Medicaid $19,235 $271,011 7.1% HHS Medicare Advantage (Part C) $13,100 $115,183 11.4% Treasury Earned Income Tax Credit $12,600 $55,400 22.7% DOL Unemployment Insurance $10,296 $90,160 11.4% Total $84,802 $881,427 Top five programs accounted for 79 percent of the revised total estimated improper payments of $107.1 billion in programs producing estimates in FY 2012

FY 2011 HHS Medicare Fee-for-Service $28,810 $336,378 8.60% HHS Medicaid $21,900 $269,241 8.10% Treasury Earned Income Tax Credit $15,200 $64,700 23.5% DOL Unemployment Insurance $13,697 $114,140 12.0% HHS Medicare Advantage (Part C) $12,390 $112,215 11.0% Total $91,997 $896,674 Top five programs accounted for 80 percent of the revised total estimated improper payments of $115.7 billion in programs producing estimates in FY 2011

Legend: DOL = Department of Labor; HHS = Department of Health and Human Services; Treasury = Department of the Treasury. Source: GAO summary of Office of Management and Budget data and agencies’ data. | GAO-15-87R


Enclosure III: Agency Programs and Activities with Reported Error Rates in Excess of 10 Percent for Fiscal Years 2011 through 2013

Agency Program Error rate Fiscal year 2013 USDA School Breakfast 25.3% Treasury Earned Income Tax Credit 24.0% SBA Disaster Assistance Loans 18.4% VA State Home Per Diem Grants 15.9% USDA School Lunch 15.7% SBA Contract Disbursements 11.6% HHS Medicare Fee-for-Service 10.1% Fiscal year 2012

USDA School Breakfast 25.2% Treasury Earned Income Tax Credit 22.7% SBA Disaster Assistance Loans 17.9% USDA School Lunch 15.5% VA Fee Program 12.0% DOL Unemployment Insurance 11.4% HHS Medicare Advantage (Part C) 11.4% Fiscal year 2011

SBA Disaster Assistance Loans 28.4% USDA School Breakfast 25.0% Treasury Earned Income Tax Credit 23.5% USDA School Lunch 16.0% VA State Home Per Diem Grants 13.7% VA Supplies and Materials 13.6% VA Fee Program 12.4% DOL Unemployment Insurance 12.0% HHS Child Care and Development

Fund 11.2%

HHS Medicare Advantage (Part C) 11.0%

Legend: DOL = Department of Labor; HHS = Department of Health and Human Services; SBA = Small Business Administration; Treasury = Department of the Treasury; USDA = Department of Agriculture; VA = Department of Veterans Affairs. Source: GAO summary of Office of Management and Budget data and agencies’ data. | GAO-15-87R


Enclosure IV: Comments from the Office of Management and Budget


Enclosure V: Comments from the Social Security Administration Office of Inspector General


Enclosure VI: Comments from the General Services Administration Office of Inspector General

(197241)

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